Gov. Kelly Armstrong presents his budget guidelines to state government agencies at the Capitol on April 8, 2026. (Photo by Michael Achterling/North Dakota Monitor)
North Dakota Gov. Kelly Armstrong unveiled lean state budget guidelines Wednesday that include a 10% budget cut for some agencies, citing a gap between state revenue and expenses.
His plan for 2027-2029 also includes a freeze on new employees and building construction with largest cuts planned for the 17 agencies with budgets above $20 million, including the departments of Health and Human Services and Corrections and Rehabilitation.
Armstrong advised the state to tighten spending amid recent volatility in oil prices, since North Dakota state revenue is heavily tied to the energy industry.
“What will oil be in a year, six months, tomorrow? We don’t know,” Armstrong said. “The bottom line is, we still need to budget conservatively.”
He said the state faces a “slow burning storm” due to a gap between ongoing revenue and expenses in the general fund, estimated to be $748 million for 2025-27.
The state budget has increased steadily as the state’s economy grew over the last two decades, Armstrong noted.
“Twenty years of growth in North Dakota has come with 20 years of growth in state budgets,” he said.
Armstrong said that while “much of that was necessary” and allowed the state to improve its infrastructure and social programs, he called the growth “unsustainable.”
The governor’s plan would put the state on track to close this gap during the 2031-2033 budget cycle, he said.
In addition to 10% budget cuts to the state’s biggest agencies, he proposed that departments with budgets of between $10 million and $20 million reduce their budgets by 3%.
He asked state agencies to identify unnecessary or ineffective programs to cut.
“I would strongly discourage proposing cuts to the most visible, effective and popular programs, knowing that there will be no political appetite to cut them,” Armstrong said.
A 10% cut will be no small task for the Department of Health and Human Services, said Interim Commissioner Pat Traynor.
“We’re the safety net organization for the state, but we’re also the largest budget,” he said.
Much of the agency’s programs also rely on federal money, he noted. He said the proposed budget cuts wouldn’t affect the $500 million or more the state will receive from the federal Rural Health Transformation Program over the next several years.
Office of Management and Budget Director Joe Morrissette said his department will look for areas where it can be more efficient and reduce payroll.
“It’s hard because part of our budget is utilities for the Capitol complex, and staff that manages payroll and things like that,” he said. “These are not areas where you can cut out a program.”
Colby Braun, director of the Department of Corrections and Rehabilitation, called the governor’s request a “tough assignment.”
He said the department will continue to refine designs for a new Missouri River Correctional Center that was expected to be presented during the 2027 legislative session, but construction plans may need to wait for more solid fiscal footing.
The North Dakota Highway Patrol also will face a 10% cut.
“We’ll need some time to see where we can become more efficient and still provide high-quality public safety,” said Col. Daniel Haugen, superintendent of the Highway Patrol.
Any agencies with budgets under $10 million would keep their budgets the same as the 2025-2027 budget cycle under the governor’s plan.
Armstrong also asked all agencies with budgets under $20 million to submit contingency plans for additional 3% budget reductions if needed.
“This is ‘break glass in case of emergency’ request,” he said.
Armstrong said exceptions to his plan for no new full-time employees or construction projects will be necessary, especially in the case of spending commitments the state has already made. This includes workers for the Heart River Correctional Center and funding for the state hospital.
His budget also includes a 3% reduction in the state’s higher education funding formula. Armstrong’s proposal keeps the K-12 funding formula the same as it is for the 2025-2027 budget.
The budget also would leave current salary increases intact, he said.
Morrisette on Wednesday presented an updated budget forecast to state agencies.
While oil prices have recently shot up due to the war in Iran, experts say they will eventually “taper back down,” he said.
The state is on track to meet its revenue forecast. Updated projections suggest North Dakota will be in better financial shape than expected at the end of the current budget cycle in 2027, according to data presented by Morrissette.
The governor suggested any surplus revenue gained from the recent spike in oil prices should be directed to one-time expenses.
He said the state general fund is currently projected to collect $5.47 billion in revenues and transfers over the 2025-2027 budget, and end with a balance of $544.7 million in the general fund.
Under state law, state agencies have until July 15 to submit their budget requests to the Office of Management and Budget. The governor’s office will then draft an executive budget proposal prior to the 2027 legislative session.
It’ll ultimately be up to the North Dakota Legislature to decide whether to follow Armstrong’s proposal.
North Dakota in February offered employees three months of wages and benefits if they leave their jobs with the state by Aug. 31.
A total of 19 state agencies signed up to participate. Employees had until the end of March to apply for the program.
Morrissette said that OMB estimates around 130 workers applied, though the agency does not have firm numbers at this time.
State agencies have until Friday to consider applications and until April 17 to tell staff whether their application has been approved or denied. Agencies must notify OMB of how many staff are participating in the program by the end of the month.
Traynor said that 94 Department of Health and Services employees applied.
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